7T - SevenTablets, Inc.

Why Companies Change Business Models

Read Time: 5 minutes

If you asked someone to summarize the nature of the company they work for in a few sentences, how do you think they would respond? Some may reply with the company’s core values or business tagline, while others may list what services they provide or who they serve. But, in addition to the value the company provides in their chosen market or industry, businesses must focus on how the services and products they offer will generate revenue and make a profit. In other words, they must have an established business model, but it’s common for business models to change as companies grow.

Profitability and providing value go hand in hand. If a business is not generating enough revenue, they are struggling to break even, or worse, it may be time to consider a business model change. Let’s explore the definition of a “business model.”

What is a Business Model? 

Investopedia defines a business model as “a company’s plan for making a profit.” A business model may include, but is not limited to:

  • Products or services offered;
  • Revenue sources and costs of operations; and
  • Their target consumers.

If those starting a business do not take time to establish a clear business model, they will lack a clear direction for their operations. This could cause them to continue shifting their focus until they land on a model that fits or until they go under. Instead, business leaders and key stakeholders should work together to outline the business model while remaining open to change along the way. There are many examples of businesses that started out with one type of business model and later became known for products or services that were wildly different, like your friendly neighborhood bookseller, Amazon. 

New businesses will need to establish their business models, but older businesses may find they need to adapt their business models in order to keep up with a changing business climate.

How to Tell When It’s Time for a Change in Business Model

Though it takes time for a company to become profitable, those that remain unprofitable for extended periods of time may find themselves in need of a business model change. Others who could benefit from shifting their focus or updating their operations include:

  • Businesses who were once profitable and are becoming unprofitable;
  • Businesses whose products or services do not catch on or reach critical mass;
  • Businesses whose competitors are innovating and adopting new technology;
  • Companies that have no online presence; or
  • Companies in industries that are undergoing a digital transformation.

The internet and technological innovations have largely expanded the possibilities for companies to have a variety of business models available to them. On the flip side, current businesses may need a business model change in order to keep up with technological innovation. For instance, take a minute to consider all the companies that exist that wouldn’t be possible without the internet. Alternatively, how many companies have you found out about online? Even brick and mortar stores are finding that consumers expect websites and often prefer opportunities for online shopping, causing the retail apocalypse to continue full force. 

Before making a business model change, your company should pay attention to what is currently working in your industry, what is currently missing, what value your business could add to the market, the future stability of the industry and in which direction the industry appears to be heading. 

It’s best to make proactive changes, rather than reactive ones. Unfortunately, many reactive companies find themselves facing bankruptcy due to business model adaptations that came far too late.

Industry Examples of a Business Model Change

The industry that is perhaps one of the best examples of a business model change is the entertainment industry. From silent movies to the first talking pictures, the transition from VHS to DVD, and the journey from brick and mortar stores to online streaming platforms, businesses have failed or survived based on their ability to predict and adapt to the pulse of the industry. Those that failed to innovate found themselves left behind or out of business.

Physical video stores found themselves in less and less demand until finally, they couldn’t justify keeping their doors open. Perhaps the most visible company that this affected was Blockbuster, which is down to its very last physical location. Though there are many factors that contributed to Blockbuster’s eventual demise, one cannot ignore the role that innovation played in the evolution of movie providers. Blockbuster’s main competitors, Redbox’s movie kiosks and Netflix’s mail and streaming services, have survived so far, with Netflix producing the model many other media companies now follow.

Businesses don’t need to completely revise their products in order to alter their business model. In terms of a target audience shift, Old Spice revamped its brand through advertising to change customer perception. The company began to market more toward younger men and compete with other popular brands through over-the-top, parodic ads.

Finally, Apple is a major household name that has undergone shifts in its product offerings and target focus. Apple enjoys the benefit of being an industry leader and often influences the direction of the technology and communication industries. Their business model is very much focused on the company’s branding itself. The late Steve Jobs liked to say Apple told customers what they wanted rather than responding solely to a customer need. However you look at it, consumers are undoubtedly hooked. Apple is now valued at well over a trillion dollars, making it more valuable than the United States’ budget deficit and the entire economies of some countries, according to Investopedia.

How Technology Can Impact Your Business Model

The need for business model innovation isn’t only for tech-savvy businesses. Levering technology is one of the ways companies establish their place at the top of their industries, regardless of what industry it may be. One such future-focused company that came to 7T was Rebel Athletic, a leading manufacturer of competitive cheer and dance uniformsthe same uniforms you’ll see on the new Netflix series, Cheer. 

Rebel Athletic struggled with sizing athletes for years. To eliminate the costs and headaches associated with traditional fittings, Rebel decided to develop a mobile app that could take accurate body measurements and streamline ordering. The mobile app would replace the need for their traditional fit kits that were used to collect measurements manually. The result? An augmented reality fitting application that could capture an athlete’s precise measurements and help them find the perfect fit. Since the app’s launch, Rebel has saved thousands of dollars on returns and exchanges and reduced the time required for each fit. 

The technology not only revolutionized the way athletes are sized for athletic wear, but also evolved into the FitFreedom mobile app which aims to break into the larger apparel industry. This unique and creative use of augmented reality resulted in a business model change for Rebel Athletic, an entirely new business for the owners, and now sets the tone of innovation for other clothing retailers. 

Is it Time to Change Your Business Model?

Could it be time for your company to undergo a business model change? Here are some questions to help you start the consideration process:

  • Is there a portion of your industry that your business is not currently tapping into?
  • Is it time to expand or shift your target customer base?
  • What role does technology play in your current business model?
  • How could your business utilize technology in an innovative way to improve your services?
  • How could technology help you streamline your services and operations to reduce costs?
  • Could a mobile app or piece of custom software enable a new revenue source for your business?

If you are interested in learning more about digital transformation and changing your business model, 7T is ready to help. We provide software and technology consulting services to help businesses determine how they can improve their operations and maximize ROI.

Our variety of service offerings includes custom mobile app and software development, system integrations, data governance tools and more. Based in Dallas, 7T maintains regional offices located in Houston and Chicago

If you are interested in partnering with an experienced development team to find a customized business solution, reach out to 7T today.

Reach out to our team today!

Shane Long

Shane Long

As President of 7T, Shane Long brings experience in mobility that pre-dates the term “smartphone” and the release of the first iPhone. His work has helped revolutionize the growth of mobility by bringing to market one of the first graphics processors used in mobile phones, technology that after being acquired by Qualcomm lived well into the 4th generation of smartphones, as well as helped pioneer the first GPS implementations in the segment. With a strong engineering and business background, Shane understands how the rise of mobility and Predictive Analytics is crucial to greater business strategies geared toward attaining competitive advantage, accelerating revenue, and realizing new efficiencies. As the leader of a B2B mobility solutions provider, he partners with business leaders including marketers and product developers to leverage enterprise mobile applications, big data and analytics, and mobile strategy.

Shane earned a B.S. at Texas A&M (whoop!) and studied mathematics as a graduate student at Southern Methodist University.


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